Associations Cities Civil and Municipal September/October 2022

California Business Properties Association – Sacramento, California

October 11, 2022

California Business Properties Association

Celebrating 50 years of service

Business View Magazine interviews Matthew Hargrove, President & CEO of the California Business Properties Association

California Business Properties Association (CBPA) is the recognized voice of all aspects of the commercial, industrial, and retail real estate sector in California — representing the largest commercial real estate consortium with over 10,000 industry members.

Established in 1972, CBPA proudly serves as the legislative and regulatory advocate for property owners, tenants, developers, retailers, contractors, land use attorneys, brokers, and other professionals in the industry by representing their interests at the State Capitol and in Washington, D.C.

CBPA is the designated legislative advocate for ICSC, Building Owners and Managers Association of California (BOMA California), NAIOP of California, the Commercial Real Estate Development Association, Institute of Real Estate Management (IREM), Retail Industry Leaders Association (RILA), National Association of Real Estate Investment Trusts (NAREIT), and hundreds of individual companies.

In January, Matthew Hargrove stepped into his new role as President & CEO of California Business Properties Association (CBPA) following the retirement of Rex S. Hime. Business View spoke with Matthew and Rex W. Hime, VP Strategic Communications for the CBPA, about the association, industry challenges, and the outlook for the future of the commercial real estate sector in California.

BVM: Can you share some background on the CBPA?

Hime: “We are an association of associations at CBPA. We were founded back in 1972 by a group of shopping center companies and leaders. A tax was proposed per parking space by the EPA, so they figured they needed to get together as a group because they couldn’t defeat this on their own as it would be devastating to the industry. So, they banded together and were able to defeat that measure and decided, going forward, that it would be smart to keep the group together to advocate for the industry’s interests. That’s how California Business Properties Association began.

BVM: Is the CBPA involved with residential and commercial sectors?

Matthew Hargrove, President & CEO

Matthew Hargrove, President & CEO, “Our mandate is primarily commercial, which is office, retail, and industrial real estate. However, we have some companies that within their portfolios have multi-family. We also work very closely with the BIA and the Apartment Association, as well as other associations in Sacramento, because the residential side really impacts the commercial side of things. We all try to coordinate to make sure that policies and regulations that move forward in Sacramento work. Even if it doesn’t apply to the commercial sector. We like to make sure that what happens on the multi-family side of things makes sense because many times we will be next.

“We also have some groups and companies that are homebuilders or multi-family builders or managers. We focus on commercial, but residential and commercial are yin and yang, and what happens in one area impacts the other. So, we work very closely with the other groups.”

BVM: How has the COVID-19 pandemic impacted your association and your members?

Hargrove: “Some sectors of real estate have done very well coming through this pandemic, but other sectors have seen a huge shift and impact on them. Primarily in the retail sector for some of the smaller retailers, and smaller traditional malls, and neighborhood centers that saw some of their smaller tenants get hammered by the pandemic. For example, the folks that have restaurants as tenants… that sector of real estate has been negatively impacted by COVID and is seeing quite a change coming through it. Also, the office sector saw an impact, where at one point there was a dip of 10 to 15 percent depending on the markets that you look at.

“Some sectors of real estate have done really good, especially in California, where there are so many rules, regulations, and laws that somewhat limit the supply of real estate. Industrial has done fairly well through COVID because of the huge uptick in the need for logistics warehouses because everybody’s ordering products from online retailers and having them delivered to their home.

“Commercial real estate is complicated. We have different sectors – an office sector, a retail sector, and an industrial sector. And even within those sectors, sometimes there are sub-impacts. One of the things that CBPA tries to do is speak on behalf of all commercial real estate, and that’s difficult to do because we are so broad and diverse, in terms of our companies and what we do. But I think that an interesting point about COVID is that it did have different impacts on different sectors, and different companies within those sectors.”

California Business Properties Association - Sacramento, California

BVM: How big of a challenge is the ongoing supply chain disruption?

Hargrove: “Supply chain and goods movement is the number one thing that we’re focusing on as an association right now. The fact that we saw how fragile our supply chain was during COVID… many of the folks on our board have for years been pointing out that there are supply chain issues in the State of California for a number of different reasons. The way it impacts commercial real estate is that we are a real stakeholder in the goods movement sector. Everything from having the warehouse and logistics centers, to representing large retailers that have had empty shelves because of it, to not being able to get supplies for our construction projects and what that does to labor.

“It has been a huge issue. We at CBPA over the past year have been working with a number of groups in Sacramento to communicate on this with the Governor’s office and with legislators. I think you’ll see a more focused effort on goods movement coming up over the next year. And trying to explain to not just policy makers because we think many of them understand that there’s a goods movement problem. A lot of those problems are rooted in some policies coming out of the legislature and from the regulatory agencies.

“So we need to be able to communicate to the general public and others what we see as issues that are creating some of these bottlenecks. That’s everything from infrastructure investment to greenhouse gas policies that are putting California at somewhat of a disadvantage compared to other states.”

BVM: What other issues are you addressing as an organization?

Hime: “Another big issue we’re dealing with involves EV charging mandates in California. We have a building codes process that happens every two years. California just finished one at the end of last year that concluded they wouldn’t put mandates on EV chargers in our existing buildings, and the rate at which they would mandate in new construction we thought was manageable. Our industry supportive of electric vehicles, we just want to do it in a common-sense, practical, fiscal manner. Our members are actually the ones going above and beyond the mandates to begin with. But we have to remind legislators that a shopping center parking lot in San Francisco may have a different demand for EV chargers than one in Bakersfield.

“So taking a statewide approach for this is an issue we’re tackling and trying to remind the legislature that there’s a reason the codes process came to the decision they did with all the research, information and input that we provided. Essentially that the legislature should leave those codes and mandates up to the people who do that every day for their job.”

BVM: How do you see the landscape evolving for your industry over the next three to five years?

Hargrove: “Commercial real estate in California is not going anywhere. But in terms of the difficulty for being able to wend our way through a construction project or to manage an existing building, it’s going to continue to get more and more difficult. The large companies, the national companies, the very well resourced companies will be able to deal better with the regulations and the laws that we’re going to see coming down. My worry is that a lot of the smaller regional companies have been and will continue to struggle with all the regulation. It’s much harder to manage and own and make a living off of a small commercial portfolio than it used to be.

“The short answer is that commercial real estate is going to survive and be fine in California. We’re going to continue to provide great facilities for you to shop at, work at, and for our goods to pass through, but the atmosphere to operate it is going to become more complicated and the more sophisticated companies are the ones that are able to thrive in California.”